Some self assessment taxpayers have received letters from HMRC asking for information to verify that repayment claims are not fraudulent. ICAEW’s Tax Faculty confirms that taxpayers are under no legal obligation to respond but may have claims cancelled or delayed if they do not.
The Tax Faculty has been informed by its members that in some cases agents have received a copy of the verification letter, but not in others.
The faculty understands that there are two versions of the letter being sent to self assessment (SA) taxpayers.
In the first, the taxpayer is instructed to call HMRC to confirm certain details. The letter states that HMRC has reason to believe that the taxpayer’s unique taxpayer reference (UTR) may have been used to submit a potentially fraudulent claim.
In the second version, the taxpayer is instructed to complete an enclosed R38 form and return it with proof of identity and address along with various other pieces of personal information (eg, employment details). As well as asking for details of the taxpayer, form R38 also asks whether an agent helped to complete the return and if so, for further details including the fees charged. In at least one case we aware of, the agent has not received a copy of the letter sent to the taxpayer.
In both letters, the taxpayer is advised that if they do not respond, their repayment claim will be cancelled and they will be removed from SA. The impact of this would be that, outside SA, the taxpayer would have to submit future repayment claims which HMRC would have the power to refuse to give effect to pending an enquiry.
The second version of the letter states that it is not a check into the return under s9A, Taxes Management Act 1970, which means that HMRC retains the ability to open an enquiry into the return once it has established that the claim is genuine and not fraudulent.
It is presumably linked to a claim under the Self-employment Income Support Scheme (SEISS) because it says that failure to reply may result in additional checks being carried out on future claims under SEISS.
These letters were discussed at a meeting with HMRC attended by some of the Tax Faculty’s members. Feedback was given on the tone and content of the letters and various amendments were suggested.
The faculty believes that HMRC has taken the comments and suggestions on board and anticipates that they will be reflected in future versions of these letters.
On 9 March 2021, Taxation published the following response from HMRC in a Readers’ Forum article when asked about the letters. “We sometimes undertake routine security checks before issuing a tax repayment to ensure money goes to the correct person. Once documentation proving identity is provided we will check and process the repayment as soon as possible.
“In line with our wider compliance approaches, these letters are only sent where our risk indicators suggest that the customer or claim may not be legitimate. However, we recognise that genuine claims and genuine customers may also trigger some of these risk indicators, which is why we ask genuine customers to contact us to verify their identify and their claim.”
In conclusion, the faculty believes that agents should advise their clients that they are under no legal obligation to respond to the questions HMRC has raised. However, if they have nothing to hide, then they should feel comfortable cooperating with HMRC and completing the questionnaire or responding to its questions.
See examples of letters
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